Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire
This post is a somewhat updated reprint of a post first appearing on February 1, 2009, with most of the links contained herein being updated.
A number of posts(1) have made reference to the legal doctrine of bona fide purchaser in the context of a purchase and sale of real property. More specifically, the posts dealt with the application of this doctrine in situations where the occupancy and possession of the real property by someone other than the owner/seller triggered a duty to inquire on the part of the purchaser as to possible unrecorded property rights of persons in possession of the real estate.
As described in these posts, the courts ruled that the purchaser had a duty to inquire of said persons in possession to ascertain what rights, if any, they had in the property. Failure to make reasonable inquiries would result in the purchaser acquiring its interest subject to any of the occupant's rights the purchaser would have discovered had such an inquiry be made. By failing to make inquiry, the purchaser would not be afforded treatment as a bona fide purchaser and, consequently, would lose the protection of the recording statutes and leave their interest in the real estate in an inferior position to any unrecorded rights of those in possession.
While certainly not purporting to be an exhaustive list of cases dealing with the issue of possession and the duty to inquire when attempting to establish (or attack) one's status as a bona fide purchaser, the following compilation of case law citations specifically address this issue.
Inasmuch as the mission of this blog is to obtain information that may be of some interest to some in real estate related professions, and "push it out the door" as soon as possible, I confess that I have not fully researched this issue as it is currently applied in any of the following states. The purpose of this post is to merely:
- make the reader aware of the existence of the case law that follows, and
- remind the reader of the importance of giving this issue the serious consideration it deserves when attempting to undo/unwind/void an abusive real estate transaction (ie. foreclosure rescue sale leasebacks, fraudulent inducement in the execution of a deed, forgeries, other real estate swindles).
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Arizona: Roy & Titcomb, Inc. v. Villa, 37 Ariz. 574; 296 P. 260 (1931):- If the circumstances were such that notice could be imputed, it is sufficient, and the particular fact relied on as having this effect is that appellee was at the time in actual, open, notorious and undisputed possession of the premises and had been since 1911.
.Practically all the authorities give assent to the proposition that the purchaser or mortgagee of land in possession of an occupant other than the holder of the record title is compelled to inquire of the occupant by what title he holds possession, or he will be held to have taken subject to whatever rights a proper inquiry would disclose the occupant had therein."
.Actual possession of land," says 46 C.J. 547, "is such notice to all the world or to anyone having knowledge of such possession as will put upon inquiry those acquiring title or a lien on the land to ascertain the nature of the right that the occupant has in the premises." In Rowe v. Ream, 105 Pa. 543, the court quotes with approval this language:
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"The possession of land is notice to the world of every title under which the occupant claims it, unless he has put a title on record inconsistent with his possession. When, as in this case, an individual is in possession under no recorded title, his possession is notice of every title which he can set up to protect himself, sufficient at least to put a purchaser on inquiry."
.In Oliver v. McWhirter, 112 S.C. 555, 100 S.E. 533, 536, is found this language:
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"One in possession under an equitable title has nothing that he can record; and possession, open and unconcealed, is the only mode by which he can give notice to the world of his rights; and when this notice is given, in the only way in which it could be given, he should be protected."
.In Carolina Portland Cement Co. v. Roper, 68 Fla. 299, 67 South. 115, 116, the court says:
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"Actual possession of land is such notice to all the world or to anyone having knowledge of such possession as will put upon inquiry those acquiring title to or a lien on the land to ascertain the nature of the rights the occupant really has in the premises. One who acquires title to or a judgment lien on land with constructive notice of the actual possession and occupancy of the land by one other than the vendor or judgment debtor takes subject to such rights as proper inquiry will disclose the occupant of the land actually has therein. Possession, in order to be constructive notice of a claim of title to the land occupied, must be open, visible, and exclusive; and such occupancy may be shown by any use of the land that indicates an intention to appropriate it for the benefit of the possessor."
.The following are to the same effect: Petrain v. Kiernan, 23 Or. 455, 32 Pac. 158; Follette v. Pacific Light & Power Corp., 189 Cal. 193, 23 A.L.R. 965, 208 Pac. 295; McVey v. McQuality, 97 Ill. 93; Moore v. Oates, 143 Ark. 328, 220 S.W. 657; Niles v. Cooper, 98 Minn. 39, 13 L.R.A. (N.S.) 49, 107 N.W. 744; Garbutt v. Mayo, 128 Ga. 269, 13 L.R.A. (N.S.) 58, 57 S.E. 495; Ross v. Hendrix, 110 N.C. 403, 15 S.E. 4; Wood v. Price, 79 N.J. Eq. 620, Ann. Cas. 1913A 1210, 38 L.R.A. (N.S.) 772, 81 Atl. 893.
.Appellee contends that it conclusively appears from the statement of Lorenzo Villa to appellant, when the note and mortgage were executed, that it had both actual and constructive notice of appellee's possession and occupancy of the premises. Whether this be true or not is immaterial because it was the duty of appellant to ascertain who was in possession of the property before purchasing an interest therein. As said by the court in Sheerer v. Cuddy, 85 Cal. 270, 24 Pac. 713, 714:
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"Whether the respondent knew of the appellant's possession or not is immaterial. It was his duty to know who was in possession of the property before making the purchase, and his purchase without ascertaining the fact must be regarded as the strongest evidence of bad faith on his part. The burden of making the proper inquiry was cast upon him by the mere fact of actual possession on the part of the appellant. If it were allowed that, by failing to acquaint himself with the fact of possession on the part of another than the vendor, the vendee could avoid the effect of the rule above stated, he could purposely avoid any inquiry on the subject, and thereby evade the rule and its consequences entirely."
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.Arkansas: Owners Ass'n of Foxcroft Woods, Inc. v. Foxglen Assocs., 346 Ark. 354; 57 S.W.3d 187; 2001 Ark. LEXIS 589 (2001):
- This court has held that when ordinary inspection of the premises by a purchaser, followed by reasonable inquiry, would reveal the existence of a servitude, then that purchaser is charged with notice. Armstrong v. McCrary, 249 Ark. 816, 462 S.W.2d 445 (1971) (citing Hannah v. Daniel, 221 Ark. 105, 252 S.W.2d 548 (1952)). When a person has knowledge sufficient to lead him or her to a fact, that person will be deemed to know it. Hannah v. Daniel, supra; Waller v. Dansby, 145 Ark. 306, 224 S.W. 615 (1920).
- The simple, independent fact of possession is sufficient to raise a presumption of interest in the premises on behalf of the occupant. And we can discover no just or rational ground for giving to this fact less significance as notice to a party purchasing the legal title from one not in possession, in consequence of the fact that such occupant had by deed divested himself of the legal title.
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- An absolute deed divests the grantor not only of his legal title, but right of possession; and when such grantor is found in the exclusive possession of the granted premises long after the delivery of his deed, here is a fact antagonistic to the fact and legal effect of the deed; and we cannot appreciate the justice, sound reason, or policy of a rule which would authorize a subsequent purchaser, while such fact of possession continues, to give controlling prominence to the fact and legal effect of the deed, in utter disregard of the other notorious prominent antagonistic fact of exclusive possession in the original grantor. He cannot be regarded a purchaser in good faith who negligently or willfully closes his eyes to visible pertinent facts, indicating adverse interest in or incumbrances upon the estate he seeks to acquire, and indulges in possibilities or probabilities, and acts upon doubtful presumptions, when by the exercise of prudent, reasonable diligence he could fully inform himself of the real facts of the case.
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- The continued exclusive possession of a vendor after his formal conveyance of the legal title is a fact in conflict with the legal effect of his deed, and is presumptive evidence that he still retains an interest in the premises, and is sufficient to put a purchaser upon inquiry, and subject him to the general rule heretofore announced in case of the party in possession being a stranger to the title as of record.
- The actual possession of the premises by the appellant was sufficient to put the respondent upon inquiry as to the nature and extent of its claim. (Pell v. McElroy, 36 Cal. 268; O'Rourke v. O'Connor, 39 Cal. 446; Moss v. Atkinson, 44 Cal. 9, 17; Hunter v. Watson, 12 Cal. 363; 73 Am. Dec. 543; Lestrade v. Barth, 19 Cal. 660, 675; Dutton v. Warschauer, 21 Cal. 610; 82 Am. Dec. 765.)
.The effect of such possession, and the diligence required of the vendee to ascertain the extent of the claim of the party in possession, is thus clearly stated in Pell v. McElroy, 36 Cal. 268.
.The fact of open, notorious, and exclusive possession and occupation of lands by a stranger to a vendor's title, as of record at the time of a purchase from and conveyance by such a vendor out of possession, is sufficient to put such purchaser upon inquiry as to the legal and equitable rights of the party so in possession, and such vendee is presumed to have purchased and taken a conveyance from the vendor with full notice of all the legal and equitable rights in the premises of such party in possession and in subordination to these rights, and this presumption is only to be overcome or rebutted by clear and explicit proof on the part of such purchaser, or those claiming under him, of diligent, unavailing effort by the vendee to discover or obtain actual notice of any legal or equitable rights in behalf of the party in possession.
.And when the location of the land is such as to render personal application to and inquiry of the occupant practicable, a purchaser failing to make such application and inquiry is no more entitled to be regarded a purchaser in good faith than if he had so inquired and ascertained the real facts of the case.
.Whether the respondent knew of the appellant's possession, or not, is immaterial. It was his duty to know who was in possession of the property before making the purchase, and his purchase without ascertaining the fact must be regarded as the strongest evidence of bad faith on his part. The burden of making the proper inquiry was cast upon him by the mere fact of actual possession on the part of the appellant.
.If it were allowed that by failing to acquaint himself with the fact of possession on the part of another than the vendor the vendee could avoid the effect of the rule above stated, he could purposely avoid any inquiry on the subject, and thereby evade the rule and its consequences entirely.
- The plaintiff came into court in this action with full notice of all the rights and equities existing between the railroad company and the defendants, and between Brownstone and his assignees and the defendants; for the defendants were in the open, notorious, and exclusive possession of this land at all these times, and plaintiff made no inquiry to ascertain the rights or claims of defendants, and he is in no better position, and no more entitled to be regarded as a purchaser in good faith than if he had so inquired and ascertained the real facts of the case. (Pell v. McElroy, 36 Cal. 268; Bank of Mendocino v. Baker, 82 Cal. 114; Scheerer v. Cuddy, 85 Cal. 273.) Neither could the plaintiff be recognized as a bona fide purchaser from his assignor, Erlanger, upon the additional ground that in the sale of equitable interests the principle of bona fide purchasers has no standing. (Taylor v. Weston, 77 Cal. 534.)
- As a general rule, possession of real property is constructive notice to any intending purchaser or encumbrancer of said property. This rule is so well established that citation of authority is hardly necessary. We mention, however, the case of Follette v. Pacific L. & P. Co., 189 Cal. 193, 205 [208 P. 295, 23 A.L.R. 965], where a long list of authorities is cited.
.This rule applied even in the case of a grantor remaining in possession after execution and delivery of a deed to his vendee. (Pell v. McElroy, 36 Cal. 268, 272, 274; O'Rourke v. O'Connor, 39 Cal. 442; Taber v. Beske, 182 Cal. 214, 216 [187 P. 746]; Hopkins v. Garrard, 7 B. Mon. (Ky.) 312.)
.In Pell v. McElroy, supra, the question presented in the instant case was before the court, as appears from the following quotation from the opinion in that case: "In the present case the question arises, whether the fact of open, notorious, and exclusive possession of lands by a vendor thereof, after transfer of his legal title thereto by deed, is sufficient to put a subsequent vendee of the same premises, while so in possession of the original vendor, upon inquiry as to the equitable rights of such original vendor, and subject such subsequent purchaser to the same rules as when a stranger to the title of his vendor, as of record, is in possession."
.Continuing, the court, on page 274 [36 Cal.], says: "An absolute deed divests the grantor not only of his legal title, but right of possession; and when such grantor is found in the exclusive possession of the granted premises long after the delivery of his deed, here is a fact antagonistic to the fact and legal effect of the deed; and we cannot appreciate the justice, sound reason, or policy of a rule which would authorize a subsequent purchaser, while such fact of possession continues, to give controlling prominence to the fact and legal effect of the deed, in utter disregard of the other notorious prominent antagonistic fact of exclusive possession in the original grantor. He cannot be regarded a purchaser in good faith who negligently or willfully closes his eyes to visible pertinent facts, indicating adverse interest in or incumbrances upon the estate he seeks to acquire, and indulges in possibilities or probabilities, and acts upon doubtful presumptions, when by the exercise of prudent, reasonable diligence he could fully inform himself of the real facts of the case."
.In the concluding paragraph of the opinion the court reiterates the rule as follows: "The continued exclusive possession of a vendor after his formal conveyance of the legal title is a fact in conflict with the legal effect of his deed, and is presumptive evidence that he still retains an interest in the premises, and is sufficient to put a purchaser upon inquiry, and subject him to the general rule heretofore announced in case of the party in possession being a stranger to the title as of record." The case of Pell v. McElroy, supra, is cited with approval in many cases decided by this court.
.The same principle is expressly approved in Taber v. Beske, supra. In that case Mrs. Beske, an ignorant woman, desired to borrow the sum of $500 upon a lot owned by her. She so informed one Horsford, who fraudulently prepared a power of attorney in his favor, and represented to her it was a mortgage on her lot to secure the payment of $500. She, relying upon his statement and without reading the power of attorney, signed it, and Horsford gave her the sum of $500. After a short visit to her old home in Europe she returned to her home here, and ever since that time had been in possession and occupancy of said lot, either in person or through her tenants. Horsford, acting under his power of attorney, conveyed the lot to one Dennison, who paid no consideration and who knew that the conveyance was unauthorized. Thereafter, and while defendant Beske was in the possession of said lot, Horsford and Dennison conveyed the lot to plaintiff for a valuable consideration. The trial court found that plaintiff acquired title to said real property with notice of the defendant's rights therein and rendered judgment in favor of the defendant.
.In affirming the judgment this court said (p. 217 [182 Cal.]): "Appellant contends that there is no evidence to support the finding that Taber, at the time he purchased and received the deed, was informed of the power of attorney and the circumstances of its execution. The finding that Mary Beske was in actual open, exclusive, and adverse possession of the lot, by herself and her tenants, at the time Taber bought and paid for the lot, put him on inquiry as to her rights and claims upon the property and charged him with knowledge of all that such inquiry, if pursued, might have developed."
.In Hopkins v. Garrard, supra, the opinion delivered by Chief Justice Marshall states the law upon this question as follows: "But the fact that, notwithstanding his deed to Hopkins, which acknowledged full payment, Garrard, the grantor, remained in possession of the land, was an indication that he had or claimed some interest in the land, and should have put the subsequent vendees on an inquiry, by which they would have easily learned that the purchase money was, in fact, unpaid, and probably that Garrard was holding the possession as security for it. On the ground of notice, therefore, implied from the possession, the lien of Garrard for his purchase money is considered effectual against the subsequent purchase, even beyond the effect of the lis pendens."
- ‘Possession of land is notice to the world of every right that the possessor has therein, legal or equitable; it is a fact putting all persons on inquiry as to the nature of the occupant's claims.’ [Citation.] ‘Except in so far as the rule has been varied by statute, actual possession of land is such notice to all the world, or to anyone having knowledge of such possession, as will put on inquiry those acquiring title or a lien on the land to ascertain the nature of the right that the occupant has in the premises. The presumption is that inquiry of the possessor will disclose how and under what right he holds possession, and, in the absence of such inquiry, the presumption is that, had such inquiry been made, the right, title, or interest under which the possessor held would have been discovered. The notice which the law presumes has been held to be actual, and not merely constructive, notice. Possession is notice not only of whatever title the occupant has but also of whatever right he may have in the property, and the knowledge chargeable to a person after he is put on inquiry by possession of land is not limited to such knowledge as would be gained by examination of the public records.’ [Citations.]
- It is a general rule that possession of real property is constructive notice to any intending purchaser or encumbrancer of the property of all the rights and claims of the person in possession which would be disclosed by inquiry. (Pell v. McElroy, 36 Cal. 268, 272.)
.This rule is extended to the case of a grantor remaining in possession after execution and delivery of a deed to his vendee and a subsequent purchaser of the same property must inquire into the equitable rights of the original vendor. (Pell v. McElroy, supra; J. R. Garrett Co. v. States, 3 Cal.2d 379 [44 P.2d 538].)
.The same rule was applied in Taber v. Beske, 182 Cal. 214, 217 [187 P. 746], where the court said: "Appellant contends that there is no evidence to support the finding that Taber, at the time he purchased and received the deed, was informed of the power of attorney and the circumstances of its execution. The finding that Mary Beske was in actual, open, exclusive, and adverse possession of the lot, by herself and her tenants, at the time Taber bought and paid for the lot, put him on inquiry as to her rights and claims upon the property and charged him with knowledge of all that such inquiry, if pursued, might have developed. (Citations.) His actual knowledge is, therefore, not necessary to support the judgment."
- Such finding and conclusion were, moreover, in accordance with the cases which, in construing section 1214, fn. 8 have held that an unrecorded lease is not void as against a purchaser who has notice of the lease or such notice as should put him on such inquiry as would disclose its existence. (Scheerer v. Cuddy, 85 Cal. 270, 272 [24 P. 713]; Commercial Bank v. Pritchard, 126 Cal. 600 [59 P. 130].)
.The rationale of this rule is that a purchaser of premises occupied in part by a third person under an unrecorded lease cannot be said to be an innocent purchaser since possession by such third party may constitute notice to the purchaser, provided it is open, notorious, exclusive and visible, and not consistent with the record title. (Scheerer v. Cuddy, supra, pp. 272-273; Manig v. Bachman, 127 Cal.App.2d 216, 221-222 [273 P.2d 596]; High Fidelity Enterprises, Inc. v. Hull, 210 Cal.App.2d 279, 281 [26 Cal.Rptr. 654].
- Whether defendant knew of the possession by Daut of the pipe and catch basin is immaterial. It was her duty to know before making the purchase, else the purchaser could purposely avoid any inquiry on the subject and thereby defeat the rule of notice by possession. (Follette v. Pacific Light & Power Corp., 189 Cal. 193, 213 [208 P. 295, 23 A.L.R. 965]; Scheerer v. Cuddy, 85 Cal. 270, 273 [24 P. 713]; Wineberg v. Moore, 194 F.Supp. 12, 16, 17; Beverly Hills Nat. Bank v. Seres, 76 Cal.App.2d 255, 263 [172 P.2d 894].)
- Insofar as the possession of the property by respondent's mother is concerned, it is well settled that "the possession of the tenant is notice of his landlord's title; that is to say, such possession is sufficient to put a person dealing with the property upon inquiry; and the law will charge him with notice of all those facts which he might have ascertained, had he pursued the inquiry with proper diligence." (O'Rourke v. O'Connor, 39 Cal. 442, 446-447; White v. Rosenstein, [236 Cal.App.2d 499] 8 Cal.App.2d 217, 223 [47 P.2d 358]; Manig v. Bachman, supra, pp. 221- 222.)
.Accordingly, "It is equally well settled that where a person who is a stranger to the record title of the vendor is in possession, the purchaser is under a duty to make inquiry of such stranger's rights, and failure to do so deprives him of the status of bona fide purchaser." (Manig v. Bachman, supra, p. 222; Hunter v. Watson, 12 Cal. 363 [73 Am.Dec. 543]; Pell v. McElroy, 36 Cal. 268.)
- As explained in Asisten v. Underwood (1960) 183 Cal.App.2d 304, 309 [7 Cal.Rptr. 84]: "It is a general rule that possession of real property is constructive notice to any intending purchaser or encumbrancer of the property of all the rights and claims of the person in possession which would be disclosed by inquiry."
."The possession required to impart notice to a subsequent purchaser must be open, notorious, exclusive and visible, and not consistent with the record title." (High Fidelity Enterprises, Inc. v. Hull, supra, 210 Cal.App.2d 279, 281.) If either a tenant or a stranger is in possession of leased premises, the purchaser is charged with all those facts which might have been ascertained had a reasonably diligent inquiry been made. (Manig v. Bachman, supra, 127 Cal.App.2d 216, 221-222; Natural Resources, Inc. v. Wineberg, supra, 349 F.2d 685, 690.)
.And as noted in Pacific Gas & Elec. Co. v. Minnette (1953) 115 Cal.App.2d 698, 705 [252 P.2d 642]: "'Possession is notice not only of whatever title the occupant has but also of whatever right he may have in the property, and the knowledge chargeable to a person after he is put on inquiry by possession of land is not limited to such knowledge as would be gained by examination of the public records." (Italics omitted.) fn. 6 The subsequent purchaser or encumberer has the burden of showing lack of notice. (Chalmers v. Raras (1962) 200 Cal.App.2d 682, 686 [19 Cal.Rptr. 531]; Manig v. Bachman, supra, 127 Cal.App.2d at p. 223.)
- We also note that '[e]very person who has actual notice of circumstances sufficient to put a prudent [person] upon inquiry as to a particular fact, has constructive notice of the fact itself in all cases in which, by prosecuting such inquiry, he [or she] might have learned such fact.' (Civ. Code, § 19.) The general rule is that possession of real property by one other than the seller is notice sufficient to put an intending purchaser or encumbrancer of property on inquiry as to the rights of the occupant unless under the peculiar circumstances of the case there is no duty to make inquiry. (Three Sixty Five Club v. Shostak (1951) 104 Cal.App.2d 735, 738 [232 P.2d 546]; Asisten v. Underwood (1960) 183 Cal.App.2d 304, 309 [7 Cal.Rptr. 84].)
- By statute, notice may be actual or constructive. Actual notice is defined as "express information of a fact," while constructive notice is that "which is imputed by law." ( Civ. Code, § 18.) (2) "A person generally has 'notice' of a particular fact if that person has knowledge of circumstances which, upon reasonable inquiry, would lead to that particular fact." ( First Fidelity Thrift & Loan Assn. v. Alliance Bank (1998) 60 Cal. App. 4th 1433, 1443 [71 Cal. Rptr. 2d 295]; Civ. Code, § 19; 5 Miller & Starr, Cal. Real Estate (3d ed. 2000) Recording and Priorities, §§ 11:49 to 11:51, 11:58 to 11:59, pp. 129-138, 147-151.)
Colorado: Martinez v. Affordable Hous. Network, Inc., 123 P.3d 1201; 2005 Colo. LEXIS 1075 (Colo. 2005):
- We have traditionally recognized three forms of notice: actual notice, constructive notice, and inquiry notice. Franklin Bank, N.A. v. Bowling, 74 P.3d 308, 313 (Colo. 2003). Actual notice occurs when a party has actual knowledge of a title defect. Id. While both "constructive and inquiry notice operate to impute knowledge to a party under certain specific conditions," we recognize them as separate inquiries. Id. at 313 n.11. Constructive notice arises where a search of the title records would have revealed a defect. See id. at 313. "Inquiry notice arises when a party becomes aware or should have become aware of certain facts which, if investigated, would reveal the claim of another." Id. However, notice will not be "imputed to a purchaser if a reasonable search would prove, or would have proven, futile." Littlefield v. Bamberger, 32 P.3d 615, 619 (Colo. App. 2001).
.Inquiry notice imputes knowledge where the circumstances are such that they would have aroused the suspicions of an ordinary purchaser. See Littlefield, 32 P.3d at 618-19. And, once there is a duty to inquire, the purchaser "will be charged with all knowledge that a reasonable investigation would have revealed." Franklin Bank, N.A., 74 P.3d at 313; see also Burman v. Richmond Homes Ltd., 821 P.2d 913, 919 (Colo. App. 1991).
.It is well settled in Colorado that, with certain exceptions inapplicable here, possession of real estate is sufficient to put an interested person on inquiry notice of any legal or equitable claim the person or persons in open, notorious, and exclusive possession of the property may have. See Hitchens v. Milner Land, Coal & Townsite Co., 65 Colo. 597, 601, 178 P. 575, 576 (1919); Colburn v. Gilcrest, 60 Colo. 92, 94, 151 P. 909, 910 (1915); Yates v. Hurd, 8 Colo. 343, 344, 8 P. 575, 576 (1885); Tiger v. Anderson, 976 P.2d 308, 310 (Colo. App. 1998).
- Actual possession is constructive notice to all the world or anyone having knowledge of said possession, of whatever rights the occupants have in the land. Such possession when open, visible and exclusive, will put upon inquiry those acquiring any title to or a lien upon the land so occupied to ascertain the nature of the rights the occupants really have in the premises. Carolina Portland Cement Company v. Roper, 68 Fla. 299, 67 So. 115; Tate v. Pensacola G.L. & Dev. Company, 37 Fla. 439, 20 So. 543; McAdams v. Wachab, 45, Fla. 482, 33 So. 702. This court also specifically held in the case of Crozier, et al., v. Ange, 85 Fla. 120, 95 So. 426, that 'where at the time property is mortgaged it is actually occupied by others than the mortgagor, the mortgagee is thereby put upon notice to inquire as to the rights of the occupants.' 19 R.C.L. 421, Sections 201 and 202.
- It is settled law in Florida that actual possession is constructive notice to all the world, or anyone having knowledge of said possession of whatever right the occupants have in the land. Such possession, when open, visible and exclusive, will put upon inquiry those acquiring any title to or a lien upon the land so occupied to ascertain the nature of the rights the occupants really have in the premises.
- Thus, "successors to legal title take title subject to those equitable interests of which they have notice." Kroitzsch v. Steele, 768 So. 2d 514, 517 (Fla. 2d DCA 2000). Forms of notice include possession, actual notice, and constructive notice of publicly recorded matters. [Cain & Bultman, Inc. v. Miss Sam, Inc., 409 So. 2d 114, 117 (Fla. 5th DCA 1982)].
.In particular, with regard to possession, the Second District court has said that "[a]ctual possession . . . when open, visible, and exclusive, will put upon inquiry those acquiring any title to or a lien upon the land so occupied to ascertain the nature of the rights the occupants really have in the premises." Kroitzsch, 768 So. 2d at 517.
Georgia: Whiten v. Murray, 267 Ga. App. 417; 599 S.E.2d 346; 2004 Ga. App. LEXIS 671 (2004):
- A bona fide purchaser for value is protected against outstanding equitable interests in land of which the purchaser has no notice. Notice sufficient to excite attention and put a party on inquiry shall be notice of everything to which it is afterwards found that such inquiry might have led. Ignorance of a fact due to negligence shall be equivalent to knowledge in fixing the rights of parties. (Punctuation and footnote omitted.) R. W. Holdco, Inc. v. SCI/RW Holdco, Inc., 250 Ga. App. 414, 415 (1) (551 S.E.2d 825) (2001).
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- Possession of land shall constitute notice of the rights or title of the occupant. In order for the possession to have the effect of notice, it must be actual, open, visible, exclusive, and unambiguous. He who takes with notice of an equity takes subject to that equity. Notice sufficient to excite attention and put a party on inquiry shall be notice of everything to which it is afterwards found that such inquiry might have led. Ignorance of a fact, due to negligence, shall be equivalent to knowledge in fixing the rights of the parties. (Citations and punctuation omitted.) Bacote v. Wyckoff, 251 Ga. 862, 866 (2) (310 S.E.2d 520) (1984).
- "Possession of land shall constitute notice of the rights or title of the occupant." OCGA § 44-5-169 (Code Ann. § 85-408).
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In order for the possession to have the effect of notice, it must be actual, open, visible, exclusive, and unambiguous. McDonald v. Dabney, 161 Ga. 711 (132 SE 547) (1929).
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"He who takes with notice of an equity takes subject to that equity." OCGA § 23-1-16 (Code Ann. § 37-115). "Notice sufficient to excite attention and put a party on inquiry shall be notice of everything to which it is afterwards found that such inquiry might have led. Ignorance of a fact, due to negligence, shall be equivalent to knowledge in fixing the rights of the parties." OCGA § 23-1-17 (Code Ann. § 37-116).
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The foregoing equitable principles demonstrate that once appellant found appellees in actual, open, visible, exclusive, and unambiguous possession of the property, he had an affirmative duty to inquire of Mrs. Wyckoff concerning appellees' rights in the premises and as a consequence of his failure to do so, he may not now prevail. Yancey v. Harris, 234 Ga. 320 (216 SE2d 83) (1975).
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Appellant's loss here is not traceable to appellees' actions, but to his own failure to perform his statutory duty to inform himself through inquiry as to the true state of the title.
- This result is compatible with generally applied legal principles. "In all but a few jurisdictions, a purchaser of land has constructive notice of all facts affecting the title of which he would have learned by an inspection of the premises. It is, therefore, the general rule that, if land is in possession of any one other than the vendor, a purchaser takes title subject to all existing rights and equities of the person in possession." 2 Patton on Titles 603, § 674 (2d Ed. 1957).
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- "To operate as notice, the possession must be open, visible, exclusive, and unambiguous, not liable to be misconstrued or misunderstood. It must not be mixed or ambiguous possession. So it has been held that possession of land by the grantee, holding under an unrecorded deed, together with the grantor, is not constructive notice of the unrecorded deed to a subsequent purchaser. Wells v. American Mortgage Co., 109 Ala. 430 (20 S 136). Where a widow contributed a part of the purchase-money of a farm, and her brother, who contributed the remainder, took title thereto in his own name without her knowledge, it was held that the fact that she lived on the farm with him did not give notice of her resulting trust to a purchaser from him. Harris v. McIntyre, 118 Ill. 275 (8 NE 182).
.
The correct rule is that when the occupation by one is not exclusive, but in connection with another, with respect to whom there exists a relationship sufficient to account for the situation, and the circumstances do not suggest an inconsistent claim, then such a possession will not give notice of a right by an unrecorded grant... If, of two occupants, one has the record title, a purchaser has the right to assume that the other has no title. [Cits.]" McDonald v. Dabney, 161 Ga. 711, 725 (132 SE 547). (Emphasis supplied.) Accord, Manning v. Manning, 135 Ga. 597 (3) (69 SE 1126); Goodwynne v. Bellerby, 116 Ga. 901 (5) (43 SE 275).
.
However, where, as here, there is no joint occupation of the land involved and defendants must rely solely on a claimed familial relation between the one in possession and the record title owner, the law does not support them. In Hall v. Turner, 198 Ga. 763 (32 SE2d 829), the possession of a father and mother was held sufficient to put a purchaser upon inquiry where the son, to whom the father and mother had deeded the property under an agreement that they might remain in possession for their lifetimes, attempted to sell without a reservation of their rights.
.
To the same effect is Waddell v. City of Atlanta, 121 Ga. App. 94 (172 SE2d 862), wherein the possession of a wife and children under an award of temporary alimony was sufficient to give notice to a prospective purchaser from the husband. Also, in Lewis v. Lewis, 210 Ga. 330 (80 SE2d 312), "[t]he actual possession of the home place by the wife and children was sufficient to put Graham [the husband's attorney who was paid with a deed to the premises] on inquiry as to the claim under which she held possession. Code § 85-408..." Id. at 334-335.
- 1. The appellants contend that since the record showed that the Haynes were in possession of the property under an expired lease agreement, they were relieved from inquiring into the nature of their possession. There is no merit in this contention.
.
In Chandler v. Ga. Chemical Works, 182 Ga. 419, 424 (185 SE 787) this court said: "`Possession of land is notice of whatever right or title the occupant has.' Code of 1933, § 85-408. In reference to this section it was said in Hadaway v. Smedley, 119 Ga. 264, 268 (46 SE 96): `If it had been a new principle announced for the first time in that Code (of 1895), it might not have applied to some of the transactions in this case; but it is not a new principle and has always been the law in this State, as will be seen by reference to the opinion of Bleckley, C. J., in Broome v. Davis, 87 Ga. 587 (13 SE 749), from which this section of the Code was taken.'
.
The principle is also found in Peck v. Land, 2 Ga. 1 (2) (46 AD 368), the second headnote of which is: `The possession of property, real or personal, remaining with the vendor after an absolute deed of conveyance, is an evidence of fraud.' (Italics ours.)
.
In Fleming v. Townsend, 6 Ga. 103 (50 AD 318), it was held: `Possession retained by the vendor, after an absolute sale of real or personal property, is prima facie evidence of fraud, which may be explained, and after the possession is proven, the burthen of explaining it rests upon those who claim under the sale.' In that case Judge Nisbet approved the holding of the lower court that `The possession in the vendor was, under that Statute (27 Elizabeth), and also by the principles of the Common Law, independent of it, prima facie evidence of fraud.'
.
While this case does not involve the question of defrauding creditors, yet the fundamental principles of notice implied from possession is at the core. The badge of fraud is there prima facie, and required one claiming under the grantee to determine by inquiry whether the badge was real or apparent. `The burthen of explaining it rests upon those who claim under the sale.'
.Or as was said in Fleming v. Townsend, supra: `The onus of explanation, after possession is proven, is upon the grantee.' So it can be seen that from very early times deeds and assignments of property, where the grantor remained in possession, were said to be affected with an infirmity that prevented them from being conclusive. The possession called for inquiry as to the right or title of the occupant in the present case, and opened the transaction to investigation.
.
In such circumstances the grantee assumed the risk of a court declaring his contract void, in the absence of a satisfactory showing that the transaction was bona fide. In Berry v. Williams, 141 Ga. 642 (81 SE 881), it was held: `1. A deed absolute in form may be shown to have been made to secure a debt, where the maker remains in possession of the land. Mercer v. Morgan, 136 Ga. 632 (71 SE 1075). 2. Actual possession is notice to the world of the right or title of the occupant. Mercer v. Morgan, supra; Bridger v. Exchange Bank, 126 Ga. 821 (56 SE 97, 8 LRA (NS) 463, 115 ASR 118); Austin v. Southern Home &. Asso., 122 Ga. 439 (50 SE 382). 3. Where the owner of land executes a deed of the character mentioned in the first note, and remains in possession of the land, and the grantee conveys the land to another who has no actual notice of the undisclosed agreement that the deed should operate as a security for debt, and who has made no inquiry of the occupant, the latter may pay or tender the amount of the debt to the first grantee and maintain an equitable action against the first grantee and the remote grantee for cancellation of both deeds as clouds upon his title, and to have the title decreed to be in him.'
.
It will be noted that in that case there was `actual possession' by the grantor. No other facts or circumstances are shown which would demand an inquiry, except the single fact of possession.
.
We have undertaken to show such facts in the present case as an additional reason for a reversal of the judgment. See, to the same effect as in the last mentioned case: Cogan v. Christie, 48 Ga. 585; Franklin v. Newsom, 53 Ga. 580; Broome v. Davis, 87 Ga. 584, 587, supra; Kent v. Simpson, 142 Ga. 49 (82 SE 440); Summerour v. Summerour, 148 Ga. 499 (97 SE 71); Waller v. Dunn, 151 Ga. 181 (106 SE 93); Sims v. Sims, 162 Ga. 523 (134 SE 308).
.
"It is contended by the defendant, however, that the present case is not controlled by the foregoing cases, but is controlled by a line of decisions beginning with Jay v. Whelchel, 78 Ga. 786 (3 SE 906), and including Malette v. Wright, 120 Ga. 735 (48 SE 229); Peabody v. Fletcher, 150 Ga. 468, 479 (104 SE 448); Johnson v. Hume, 163 Ga. 867 (137 SE 56); Rimes v. Floyd, 168 Ga. 426, 428 (148 SE 86).
.
We think it will be found that the case of Jay v. Whelchel, supra, and the cases following and based upon it, stand upon their special facts. If not, the older cases upon which section 85-408, supra, is founded must prevail. In Bridger v. Exchange Bank, 126 Ga. 821, 826 (56 SE 97, 8 LRA (NS) 463, 115 ASR 118), it was stated, as to the Malette case: `The decision never intended to abrogate the general rule, but merely held that the facts of that case did not fall within it.' The two lines of cases have led to some very close decisions. It is worth while to note that Chief Justice Bleckley wrote the decisions in both Jay v. Whelchel and Broome v. Davis, from which latter the Code provision was taken. There is no conflict between the two decisions."
- We have held that possession by other than the grantee of record is constructive notice to a subsequent purchaser of the claim of the person in possession. Fajen v. Powlus, 96 Idaho 625, 533 P.2d 746 (1975).
- The rule of law which seems to control in a like situation is that the retention of possession by the grantor of the property conveyed is notice of his or her interest in the property, and to those claiming under the grantee, and such rule is laid down in the case of Ford v. Marcall, 107 Ill. 136, wherein the court said: "The law is, as this court has declared in White v. White, 89 Ill. 460, that when the grantor of real estate remains in possession, all persons acquiring title from the grantee are chargeable with notice of all the claims of the grantor."
.This rule was followed and approved in the case of Ronan v. Bluhm, 173 Ill. 277, where the court said: "It is proper we should remark, in answer to the discussion upon the point, that as it is conceded by all parties that the said Thomas Ronan did not deliver possession of the premises in question to the grantee, Carbine, but remained in the open and exclusive occupancy thereof, appellee, Bluhm, is deemed, as matter of law, to have taken the conveyance from Carbine with full notice of all the rights and equities of said Ronan in the premises. Illinois Central Railroad Co. v. McCullough, 59 Ill. 166; White v. White, 89 id. 460; Ford v. Marcall, 107 id. 136." It is to be noted from what the court said in this opinion that Bluhm was deemed as a matter of law to have taken the conveyance from Carbine, the grantee of Ronan, with full notice as to all the rights and equities of Ronan in the premises.
.This rule has been passed upon by the courts of this State, and the law is again discussed and approved in the case of Rock Island & Peoria Ry. Co. v. Dimick, 144 Ill. 628. The court in this opinion said: "The law is well settled in this State, as generally elsewhere, when not changed by the recording acts, that open and exclusive possession of lands, under an apparent claim of ownership, is notice to those subsequently dealing with the title of whatever interest the possessor has in the premises, whether the interest be legal or equitable in its nature. Wade on Notice, sec. 273; Davis v. Hopkins, 15 Ill. 519; Truesdale v. Ford, 37 Ill. 210; Smith v. Jackson's Heirs, 76 Ill. 254; Partridge v. Chapman, 81 Ill. 137. It has been held also in this State, that if the grantor remains in possession after conveyance, purchasers from the grantee are affected with notice of the grantor's rights in the land. White v. White, 89 Ill. 460; Ford v. Marcall, 107 id. 136."
.In the case of Porter v. Clark, 23 Ill. App. 567, this rule was also approved, and in discussing the subject matter of the litigation, the court there stated what we regard as pertinent in its application to the instant case. This statement is: "If Porter, knowing as he did that Clark was in possession, had gone to him and inquired as to his rights, he would undoubtedly have been told that the purchase money had not been paid, and that he, Clark, claimed a vendor's lien on the land."
- The final question to be answered then is, exactly to what priority was the Bryants' interest restored upon negation of the subordination agreement in relation to the subsequently executed mortgage. The answer turns on whether Life, as Mortgagee, was a bona fide purchaser such that its interest was protected by the recording act. Metcalf v. Altenritter (1977), 53 Ill. App. 3d 904, 369 N.E.2d 498.
.A bona fide purchaser is one who takes without notice of a prior claim or encumbrance. (Guard ex dem. Robinson v. Rowan (1840), 3 Ill. (2 Scam.) 499.) A mortgagee of realty is regarded as a purchaser, and, if the mortgage is supported by consideration and is taken in good faith, the mortgagee will be protected against adverse claims of which it has no notice. (59 C.J.S. Mortgages sec. 232 (1949).)
.Where, however, the mortgagee, at the time of taking the mortgage, has knowledge or legal notice of a prior conveyance, it is not entitled to the protection of a bona fide purchaser. (Fidelity Trust & Savings Bank v. Williams (1936), 285 Ill. App. 131, 1 N.E.2d 739.) One who takes a mortgage upon property with knowledge, either actual or constructive, of an earlier although unrecorded conveyance of it, takes it subject thereto and will not be permitted by placing his mortgage first on the record to gain priority over the earlier lien. St. Boniface Building & Loan Association v. Demopoulos (1939), 302 Ill. App. 614, 24 N.E.2d 171.
***
- Illinois courts have uniformly held that the actual occupation of land is equivalent to the recording of the instrument under which the occupant claims interest in the property. (Bullard v. Turner (1934), 357 Ill. 279, 192 N.E. 223; Beals v. Cryer (1981), 99 Ill. App. 3d 842, 426 N.E.2d 253). The open and visible possession of land by the equitable owner is sufficient to charge a mortgagee with notice of the rights of such owner, and the mortgagee will take subject to the rights of the person in possession. Williams v. Spitzer (1903), 203 Ill. 505, 68 N.E. 49.
- A person who takes property for valuable consideration without notice of another's adverse claim is regarded as a bona fide purchaser whose rights are superior to competing claims. Life Savings & Loan Association v. Bryant, 125 Ill. App. 3d 1012, 81 Ill. Dec. 577, 582, 467 N.E.2d 277 (1st Dist. 1984)."
.A mortgagee of realty is afforded the same protections as a bona fide purchaser if the mortgagee secures the mortgage without knowledge or notice of adverse claims to its mortgage. Id. Notice of a competing interest in the realty may be predicated upon actual or constructive knowledge, and may also be imputed if the circumstances impose a duty of inquiry upon the purchaser/mortgagee. Burnix oil Co. v. Floyd, 106 Ill. App. 2d 16, 23, 245 N.E.2d 539 (1st Dist. 1969).
.A person is charged with the duty of inquiry only upon gaining knowledge of facts inconsistent with the mortgagor's claim or those "facts which would make a prudent person suspicious. In re Ryan, 851 F.2d 502, 511 (1st Cir. 1988). Inquiry notice imputes knowledge of all those facts which a diligent inquiry would have revealed.
.A person who takes property for valuable consideration without notice of another's adverse claim is regarded as a bona fide purchaser whose rights are superior to competing claims. Life Savings & Loan Association v. Bryant, 125 Ill. App. 3d 1012, 81 Ill. Dec. 577, 582, 467 N.E.2d 277 (1st Dist. 1984).
.A mortgagee of realty is afforded the same protections as a bona fide purchaser if the mortgagee secures the mortgage without knowledge or notice of adverse claims to its mortgage. Id. Notice of a competing interest in the realty may be predicated upon actual or constructive knowledge, and may also be imputed if the circumstances impose a duty of inquiry upon the purchaser/mortgagee. Burnix oil Co. v. Floyd, 106 Ill. App. 2d 16, 23, 245 N.E.2d 539 (1st Dist. 1969).
.The most common example of inquiry notice charged to a mortgagee is when a person other than the vendor is in possession of the property. Life Sav. & Loan Ass'n v. Bryant, supra, 81 Ill. Dec. at 582, 467 N.E.2d 277.
.However, inquiry notice is imputed whenever the cumulative facts or circumstances create a reasonable suspicion that the mortgagee's interests are subject to an adverse claim. See, e.g., In re Cutty's-Gurnee, Inc., supra, 133 Bankr. at 952-53.
.Factors, besides possession, which can serve as red flags to place a party on inquiry notice include: the extensive involvement of the putative bona fide purchaser in the transaction; the precarious financial status of the plaintiff; the low purchase price of the property; and the ease at which minimal investigation would uncover the fraudulent nature of the transaction. Shacket v. Roger Smith Aircraft Sales, 651 F. Supp. 675, 691-92 (N.D. Ill. 1986).
- Inquiry notice is the knowledge the law imputes to a lien claimant or purchaser of real property when such claimant is under a duty of inquiry. Inquiry notice imputes knowledge of all facts that a diligent inquiry would have brought to light. Miller v. Bullington, 381 Ill. 238, 44 N.E.2d 850 (1942).
.The lien claimant's duty of inquiry depends upon all the facts and circumstances. It is clear that where a physical inspection of the property would reveal an adverse interest or where there is a party in possession other than the record title owner, the subsequent lien claimant has a duty to inquire of the possessor as to his interest and is charged with knowledge of the facts discoverable from such an inquiry or inspection. Miller, 381 Ill. at 244, 44 N.E.2d at 853; Burnex Oil Co. v. Floyd, 106 Ill. App. 2d 16, 23, 245 N.E.2d 539, 544 (1st Dist. 1969); In re Ehrlich, 59 Bankr. 646, 650 (Bankr. N.D. Ill. 1986).
- It has long been settled in Illinois,[8] as it is elsewhere, see 5 Herbert Thorndike Tiffany, The Law of Real Property § 1287 at 57 (3d ed.1939), that possession of property is notice of whatever rights to the property the party in possession claims, Ambrosius, 2 Ill.2d at 182, 117 N.E.2d at 74; Miller, 381 Ill. at 243, 44 N.E.2d at 852, and when the party claims title under a deed, possession is equivalent to the recording of the deed, Miller, 381 Ill. at 243, 44 N.E.2d at 852; Banco Popular, 335 Ill.App.3d at 210, 269 Ill.Dec. 389, 780 N.E.2d at 1125.
.A purchaser therefore has an obligation to ask the party in possession by what right he claims possession and what his interest is. Bryant, 402 Ill. at 477, 84 N.E.2d at 418. The purchaser is charged with notice of all facts such an inquiry would reveal. Id. at 477-78, 84 N.E.2d at 418; see also Ehrlich, 59 B.R. at 650.
.What constitutes "possession," however, is less clear. To serve as notice of an unrecorded interest, possession must be "open, visible, exclusive, and unambiguous." Robertson v. Wheeler, 162 Ill. 566, 575, 44 N.E. 870, 872 (1896) (internal quotation omitted); see also Beals v. Cryer, 99 Ill.App.3d 842, 845, 55 Ill.Dec. 278, 426 N.E.2d 253, 255 (1981); Burnex Oil Co. v. Floyd, 106 Ill.App.2d 16, 21-22, 245 N.E.2d 539, 543 (1969); Millikin Trust Co. v. Gregory, 292 Ill.App. 28, 35, 10 N.E.2d 853, 856 (1937).
.At the same time, "neither actual occupancy, cultivation, [n]or residence" is necessary. Morrison v. Kelly, 22 Ill. 609, 624 (1859); see also Chicago Title & Trust Co. v. Darley, 363 Ill. 197, 202, 1 N.E.2d 846, 849 (1936); Beals, 99 Ill.App.3d at 844, 55 Ill.Dec. 278, 426 N.E.2d at 255. "Improvements or acts of dominion" showing the possessor has "exclusive 709*709 management and control" are enough. Beals, 99 Ill.App.3d at 844, 55 Ill.Dec. 278, 426 N.E.2d at 255; see also Banco Popular, 335 Ill.App.3d at 211, 269 Ill.Dec. 389, 780 N.E.2d at 1126; see, e.g., Bryant, 402 Ill. at 475, 84 N.E.2d at 417 (holding party was in possession who had "commenced to rehabilitate and improve" buildings). Whether a party has possession depends on the facts of each case. Morrison, 22 Ill. at 624-25; Beals, 99 Ill. App.3d at 844, 55 Ill.Dec. 278, 426 N.E.2d at 255.
- So long, in fact, that more than a century ago the Illinois Supreme Court described the rule as "too well settled to call for the citation of authorities." Mason v. Mullahey, 145 Ill. 383, 388, 34 N.E. 36, 36 (1893).)
Indiana: Thomas v. Thomas, (No. 45A05-0906-CV-357, Ind. Ct. of App., March 16, 2010):
- See Failure To Inspect Property & Inquire Into Rights Of Parties In Possession Prior To Making Loan Leaves Indiana Lender With Voided Mortgage for excerpts from this case.
- "A land purchaser has the burden to establish the status of bona fide purchaser. To do so, the purchaser must show the purchase was made without either actual or constructive notice of existing rights in the property." Sun Valley Iowa Lake Ass'n v. Anderson, 551 N.W.2d 621, 638 (Iowa 1996). A person who purchases land with knowledge of facts that would put a prudent person upon inquiry that, pursued with ordinary diligence, would lead to actual notice of rights claimed adversely by another, is chargeable with actual notice. Nat'l Properties Corp. v. Polk County, 351 N.W.2d 509, 511 (Iowa 1984).
.They "may not act in contravention to the dictates of reasonable prudence, or refuse to inquire when the propriety of the inquiry is naturally suggested by circumstances known to" them. Raub v. Gen. Income Sponsors, 176 N.W.2d 216, 220 (Iowa 1970).
- The general rule is that possession of land is notice to the world of whatever rights the possessor may have in the property. See Gray v. Zelmer, 66 Kan. [514, 72 Pac. 228 (1903)].
- "A good-faith purchaser is one who purchases without notice of a defect in the vendor's title." Michigan Nat'l Bank & Trust Co v Morren, 194 Mich. App. 407, 410; 487 N.W.2d 784 (1992). Notice can be actual or constructive. Kastle v Clemons, 330 Mich. 28, 31; 46 N.W.2d 450 (1951).
***
- Constructive notice exists "[w]hen a person has knowledge of such facts as would lead any honest man, using ordinary caution, to make further inquiries concerning the possible rights of another in real estate, and fails to make" such inquiries. Kastle, supra at 31. The relevant issues are whether the facts were sufficient to give rise to the need to make further inquiry and,if so, whether due diligence was exercised in making the inquiry. American Fed S&L Ass'n v Orenstein, 81 Mich. App. 249, 252; 265 N.W.2d 111 (1978).
.The open, manifest, unequivocal possession of premises by a person constitutes constructive notice of that person's possible interests in the property. Kastle, supra at 31. Where the purchaser's agent has information concerning the possible interest of another, the purchaser is charged with constructive notice of the same information, id. at 32, unless the agent's interest is adverse to that of the purchaser. Bryce v Jones, 54 Mich. App. 709, 715-716; 221 N.W.2d 433 (1974), rev'd on other grounds 394 Mich. 425 (1975).
- Notice is whatever is sufficient to direct attention of the purchaser of realty to prior rights or equities of a third party and to enable him to ascertain their nature by inquiry. Notice need only be of the possibility of the rights of another, not positive knowledge of those rights. Notice must be of such facts that would lead any honest man, using ordinary caution, to make further inquiries in the possible rights of another in the property. [Royce v Duthler, 209 Mich. App. 682, 690; 531 N.W.2d 817 (1995), quoting Schepke v Dep't of Natural Resources, 186 Mich. App. 532, 535; 464 N.W.2d 713 (1990)].
- Public policy generally favors allowing a degree of reliance on the title shown in public records. See Nussbaumer v. Fetrow, 556 N.W.2d 595, 599 (Minn. App. 1996), review denied (Minn. Feb. 26, 1997) (stating policy of allowing judgment creditors to rely on record). But the reliance allowed is not absolute. A "party attempting to invoke the doctrine [of equitable estoppel] cannot be negligent and cannot have knowledge of the defect in the title."
W. Concord Conservation Club, Inc. v. Chilson, 306 N.W.2d 893, 896 (Minn. 1981).
.A prospective purchaser is obligated to discover anyone in possession of the land at issue and to "inquire into the nature and extent of the occupant's interest." Id. As a result of this obligation, the purchaser is held to have knowledge of all the "rights of the [possessor] and also of all facts connected therewith which reasonable inquiry would have developed." Claflin v. Commercial State Bank, 487 N.W.2d 242, 248 (Minn. App. 1992), review denied (Minn. Aug. 4, 1992). "In order to have status as a bona fide purchaser the mortgagee's inquiry must be directed to the person in possession; inquiry of the mortgagor, who may have reason to conceal the truth, is not sufficient." Id.
Missouri: Obernay v. Chamberlin, 506 SW 2d 446 (Mo. 1974):
- The leading Missouri case on this subject is Drey v. Doyle, 99 Mo. 459, 12 S.W. 287, wherein the court stated: "Now from the line of former adjudications of this court it is plain to be seen that the notice which will postpone a recorded instrument, affecting real estate, to a prior unrecorded one, must be actual notice. Such notice may be shown by direct evidence, or it may be inferred from facts and circumstances. The question is one of fact, and is to be determined like any other fact. Circumstances coming to the knowledge of the subsequent purchaser, which would put a prudent person upon inquiry, should go to the jury as evidence of notice. In short any evidence tending to show knowledge of the prior unrecorded instrument should be received as evidence of notice. The inference to be drawn from the facts and circumstances is one of fact and not of law.Possession and knowledge thereof will, in ordinary cases, be good proof of notice of the title under which the party in possession claims. Such evidence, under other circumstances, will be of little value."The Missouri cases on this subject are treated at length in an article on possession as notice, appearing in 16 Mo.L.Rev. 142 (April, 1951).
- Furthermore, the purchaser of the property takes subject to the rights of anyone in actual possession. Karsznia v. Kelsey, 262 S.W.2d 844, 846 (Mo.1953); Hallauer v. Lackey, 188 S.W.2d 30, 34 (Mo. 1945); Woodbury v. Connecticut Mutual Life Insurance Co., 166 S.W.2d 552, 554-55 (Mo.1942); Langford v. Welton, 48 S.W.2d 860, 863 (Mo.1932); Ballenger v. Windes, 99 S.W.2d 158, 159 (Mo.App.1936). A purchaser may not plead lack of notice of the claims of an occupant.
- A purchaser of real estate takes it subject to the rights of anyone in actual possession. Karsznia v. Kelsey, 262 S.W.2d 844, 846 (Mo.1953); Willett v. Centerre Bank of Branson, 792 S.W.2d 916, 919 (Mo.App.S.D.1990); Hayward v. Arnold, 779 S.W.2d 342, 345 (Mo.App.W.D.1989). A purchaser is charged with such knowledge as he could have obtained from the party in possession upon reasonable inquiry. Hallauer v. Lackey, 353 Mo. 1244, 188 S.W.2d 30, 34 (1945); Woodbury v. Connecticut Mutual Life Ins. Co., 350 Mo. 527, 166 S.W.2d 552, 555 (1942).
- Plaintiff Hart was familiar with property and knew defendant-respondent Lillian Parrish, widow of Charles H. Parrish, was in possession, "living on the property." In these circumstances, it should not be held Mittler had no notice of the fraud upon which defendant Lillian has relied for cancellation.
- It is true that, as our courts have reiterated many times, notice is regarded in law as actual where the person sought to be charged therewith either knows of the existence of the particular fact in question or is conscious of having the means of knowing it, even though such means may not be employed by him;[12] and that, since notice does not mean positive information brought directly home to the person sought to be affected thereby, whatever fairly is sufficient to put an ordinarily prudent person on inquiry constitutes notice to him of such facts as would be disclosed by reasonable pursuit and proper inquiry.[13]
.
For, justice is not so indulgent as to encourage one to shut his eyes to circumstances which would excite the zetetic impulse in an ordinarily prudent individual [Drey v. Doyle, 99 Mo. 459, 469, 12 S.W. 287, 289] or to throw away the key to the door of exploration through which the facts reasonably might be ascertained [Barrett v. Davis, 104 Mo. 549, 561, 16 S.W. 377, 380; James v. Hutchinson, Mo.App., 211 S.W.2d 507, 511]; and, from early times, our courts "have always recognized that the still small voice of suggestion, emanating as it will from contiguous facts and surrounding circumstances, pregnant with inference and provocative of inquiry, is as potent to impart notice as a presidential proclamation, or an army with banners." Connecticut Mut. Life Ins. Co. v. Smith, 117 Mo. 261, 292-293, 22 S.W. 623, 629; Adams v. Gossom, 228 Mo. 566, 583, 129 S.W. 16, 21.
.
However, one is put on inquiry and charged with notice of the facts which would be disclosed thereby, only when "`the inquiry becomes a duty, and the failure to make it a negligent omission'" [Laughlin v. Findlay, 324 Mo. 1021, 1024, 25 S.W.2d 464, 465(1)];[14] or, as otherwise stated, "`(w)here there is a duty of finding out and knowing, negligent ignorance has the same effect in law as actual knowledge.'"[15]
.
Whether the circumstances are sufficient to give rise to a duty of further inquiry is ordinarily a question of fact[16] [at least where the evidence is conflicting or is such that more than one inference of fact might be drawn therefrom (Merrill on Notice, Vol. 1, Section 64, p. 61)], frequently fraught with appreciable difficulty and always determinable in the light of the circumstances of the particular case under consideration;[17] and whether, when one is put on inquiry, the exercise of common prudence and ordinary diligence [Edwards v. Carondelet Milling Co., 108 Mo. App. 275, 287, 83 S.W. 764, 768; Kitchen v. St. Louis, K. C. & N. Ry. Co., 69 Mo. 224, 265] in further investigation would have led to discovery of the information, knowledge of which is sought to be charged, likewise usually becomes a question of fact.[18]
- Bona fide purchasers receive protection under the recording statutes. However, recordation does not protect against interests, such as adverse possession, which arise by operation of law.
."A title depends not only upon the deeds and other writings appearing of record, but also upon a great number of facts nowhere appearing of record." (Citation omitted.) The recording acts offer no protection against forgery, prescription, adverse possession, etc. Neither do the recording acts protect against conditions and rights revealable by a personal inspection of the property, and, accordingly, an inspection is an essential part of title examination.
.
The inspection should ascertain (1) physical conditions and (2) unrecorded rights of parties in occupation. Milton R. Friedman, Friedman on Contracts, § 9:7, vol. II, (7th ed., Practising Law Institute, 2007). (Emphasis added.) "When there appears possession of land by persons other than the record holder, which possession is inconsistent with the record title, there is a duty of inquiry imposed upon a purchaser of that land." Rase v. Castle Mountain Ranch, Inc. (1981), 193 Mont. 209, 219, 631 P.2d 680, 685.
- Possession of the land is notice to the world of the possessor's rights therein and of all possessory interests of which inquiry of the possessor would elicit knowledge. Grand Island Hotel Corp. v. Second Island Development Co., 191 Neb. 98, 214 N.W.2d 253 (1974). Had Frank inquired into the status of 3's Lounge's interest, he would have easily discovered that 3's Lounge held an option to purchase the disputed property.
- According to the statute, a purchaser or lessee possesses the senior claim if he or she records without notice of a prior unrecorded interest. Amoskeag Bank, 133 N.H. [11, 14, 572 A.2d 1153 (1990)]. Knowledge of a prior unrecorded interest, however, can subjugate a subsequent purchaser or lessee's seniority in the chain of title. Id. Under New Hampshire law, a subsequent lessee cannot have the senior claim to real estate if he or she has actual notice of a prior interest at the time the subsequent claim is recorded, even if no recording of the prior interest is made. Id.; see also Rogers v. Jones, 8 N.H. 264 (1836) (unrecorded deed is good against purchasers with notice).
.New Hampshire case law also recognizes that one may be charged with constructive knowledge of a prior interest in real estate where reason exists for a party to inquire. See Janvrin v. Janvrin, 60 N.H. 169, 172-73 (1880); see also Sawin v. Carr, 114 N.H. 462, 464, 323 A.2d 924 (1974) (obligation to investigate arose from the fact that the third party claiming interest occupied the premises). Failure to inquire can defeat one's claim to the real estate. Sawin, 114 N.H. at 466-67 (where plaintiffs had been in possession of property for nearly four years, had made substantial improvements thereon, and were in possession when subsequent purchaser bought the property, subsequent purchaser had a duty to inquire and was chargeable with notice of what he might have learned on examination).
- New Jersey law has long recognized that a bona fide purchaser for value of real estate who purchases the property knowing others are in possession of the property has a duty to make reasonable and diligent inquiry of the rights to the property by those in possession. Hinners v. Banville, 114 N.J. Eq. 348, 168 A. 618 (E. & A.1933). Hinners is a mortgage foreclosure case where owners were served by publication. The property was sold at a sheriff's sale and then purportedly sold to a bona fide purchaser for value. The sale to the bona fide purchaser for value was set aside since the family was in possession of the property, and the court held that the bona fide purchaser for value had a duty to make a reasonable investigation of the rights of the party in possession. Id. at 356-57, 168 A. 618. See also, Michalski v. U.S., 49 N.J. Super. 104, 108-09, 139 A.2d 324 (Ch.Div.1958).
New York: Phelan v. Brady (try here for Google version), 119 N.Y. 587; 23 N.E. 1109; (NY 1890):
- Actual possession of real estate is sufficient notice to a person proposing to take a mortgage on the property, and to all the world of the existence of any right which the person in possession is able to establish. [citations omitted].
- alleged that the plaintiff openly possessed and occupied the subject premises pursuant to a claim of equitable ownership prior to Tibert's purchase.
.Accordingly, Tibert may have had a duty to inquire with regard to the plaintiff's possession, such that he would not be considered a bona fide purchaser for value who is entitled to the protections of Real Property Law § 291 (see Phelan v Brady, 119 NY 587, 591-592, 23 NE 1109 [1890]; Webster v Ragona, 7 AD3d 850, 854-855, 776 NYS2d 347 [2004]; Vitale v Pinto, 118 AD2d 774, 776, 500 NYS2d 283 [1986]).
- Whether a party has actual or inquiry notice of a competing interest is a relevant consideration in determining if that party is a bona fide purchaser entitled to the protection of the recording act (see Ithaca Assoc. Co. v Plataniotis, 274 AD2d 640, 642, 710 N.Y.S.2d 688 [2000]; Tompkins County Trust Co. v Talandis, 261 AD2d 808, 810, 690 N.Y.S.2d 330 [1999], lv dismissed 93 NY2d 1041, 719 N.E.2d 930, 697 N.Y.S.2d 569 [1999]; see also Real Property Law § 291).
.A party will be deemed to have inquiry notice when it had "'knowledge of facts that would lead a reasonably prudent purchaser to make inquiry'" (Morrocoy Mar. v Altengarten, 120 AD2d 500, 500, 501 N.Y.S.2d 701 [1986], quoting 1 Warren's Weed, New York Real Property, Bona Fide Purchaser §1.05, at 357).
.Notably, "'actual possession of real estate is notice to all the world of the existence of any right which the person in possession is able to establish'" if such possession is inconsistent with the title of the apparent owner of record (Wardell v Older, 70 AD2d 1008, 1009, 418 N.Y.S.2d 196 [1979], quoting Ehrlich v Hollingshead, 275 App Div 742, 743, 87 N.Y.S.2d 682 [1949]).
- Furthermore, the court should not have determined, as a matter of law, that the lease was void as against Horowitz, who purchased the premises at the foreclosure sale, because it was unrecorded. Although a lease for a term exceeding three years is a conveyance which may be recorded (see Real Property Law § 290[2]), an unrecorded conveyance is void only as against a subsequent good faith purchaser for value (see Real Property Law § 291).
.Moreover, "[a]ctual possession of real estate is sufficient notice . . . to all the world, of the existence of any right which the person in possession is able to establish" (Phelan v Brady, 119 NY 587, 591-592, 23 N.E. 1109; see Ward v Ward, 52 AD3d 919, 921, 859 N.Y.S.2d 774; Nethaway v Bosch, 199 AD2d 654, 605 N.Y.S.2d 135). Here, in support of its motion for summary judgment, the plaintiff offered no evidentiary proof that its predecessor-in-title, Horowitz, was a good faith purchaser who took title without actual or constructive notice of the defendants' unrecorded lease interest.
- "A person is an 'innocent purchaser' when he purchases without notice, actual or constructive, of any infirmity, and pays valuable consideration and acts in good faith." Lockridge v. Smith, 206 N.C. 174, 173 S.E. 36.
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- The burden of proof of the "innocent purchaser" issue is upon those claiming the benefit of this principle -- in this case the defendants Price. Hughes v. Fields, 168 N.C. 520, 84 S.E. 804; Lumber Co. v. Trading Co., 163 N.C. 314, 79 S.E. 627; Cox v. Wall, 132 N.C. 730, 44 S.E. 635.
- Actual possession is treated as the equivalent of notice to the purchaser and as a substitute for registration. Webber v. Taylor, 55 N.C. 9; Edwards v. Thompson, 71 N.C. 177; Tankard v. Tankard, 79 N.C. 54; Heyer v. Beatty, 83 N.C. 285; Bost v. Setzer, 87 N.C. 187; Johnson v. Hauser, 88 N.C. 388; Staton v. Davenport, 95 N.C. 11; Mayo v. Leggett, 96 N.C. 237, 1 S.E. 622. See also Allen v. Bolen, 114 N.C. 560, 18 S.E. 964; 51 C.J.S., Landlord and Tenant, Sec. 258; Raisin v. Shoemaker, supra; Eckman v. Beihl, 116 N.J. 308, 184 A. 430; Huddleston v. Ward (Ohio), 68 N.E. 2d 580; 39 Am. Jur., Notice and Notices, Sec. 18; Annotation, 74 A.L.R. 355.
- Conced[es] the soundness of the principle established by the decided weight of authority, that possession by a person other than the vendor, when such possession is open, notorious and exclusive, puts a purchaser upon inquiry and is notice of every fact which he could have learned by proper inquiry (as held by this Court in Edwards v. Thompson, 71 N.C. 177; Staton v. Davenport, 95 N.C. 11; Tankard v. Tankard, 79 N.C. 54; ibid., 84 N.C. 286; Bost v. Setzer, 87 N.C. 187; Johnson v. Hauser, 88 N.C. 388; Mfg. Co. v. Hendricks, 106 N.C. 485, 11 S.E. 568; Patterson v. Mills, 121 N.C. 258, 28 S.E. 368), [...]
- Open, notorious, and exclusive possession puts a purchaser upon inquiry, and is notice of every fact which he could have learned by inquiry.
- The proper inquiry is whether a vendee in possession under an oral land contract has any enforceable rights as against a subsequent purchaser who buys the property from the vendor with knowledge of the vendee's possession but without knowledge of the oral land contract. The answer to this question is found in R.C. § 5301.25(A), which provides that an unrecorded land contract is "fraudulent, so far as relates to a subsequent bona fide purchaser having, at the time of purchase, no knowledge of the existence of such * * * land contract[.]"
.Because Rice's land contract with Speakman was oral, it necessarily was unrecorded. Moreover, the record contains no evidence that Bishop knew of the land contract before she purchased the Pinnacle Road property. She testified that she merely had seen Rice's trucks there. Although it might be argued that Bishop's observation of the trucks imposed on her some duty to inquire into the circumstances surrounding their presence, the language of R.C. § 5301.25(A) provides otherwise.
.Under the statute, an unrecorded land contract is fraudulent as to a subsequent purchaser who has no knowledge of it. When an interest in land is unrecorded, the knowledge referred to in R.C. §5301.25(A) is actual knowledge at the time of purchase. Inquiry notice is insufficient. Montgomery County Treasurer v. Gray, Montgomery App. No. 20254, 2004 Ohio 2729, at P20-21; see also Emrick v. Multicon Builders, Inc. (1991), 57 Ohio St.3d 107, 109, 566 N.E.2d 1189, quoting Varwig v. Cleveland, Cincinnati, Chicago & St. Louis R.R. Co. (1896), 54 Ohio St. 455, 468, 44 N.E. 92 ("'Where it appears that the party was a purchaser for value it is not a defense in support of a claim based on an unrecorded deed to show that he took title under circumstances which ought to have excited apprehension and inquiry in the mind of a prudent and reasonable man. No other view will give effect to the statute. Its words make the absence of knowledge of the release at the time of the purchase the test; not absence of that which might induce inquiry.'").
.Given that Rice's oral land contract must be treated as fraudulent under R.C. § 5301.25(A), we conclude that he has no enforceable rights or interest in the Pinnacle Road property as against Bishop, a bona fide purchaser who took without knowledge of the land contract.
- Pursuant to R.C. 5301.25, "a bona fide purchaser for value is bound by an encumbrance upon land only if he has constructive or actual knowledge of the encumbrance." Emrick v. Multicon Builders, Inc. (1991), 57 Ohio St.3d 107, 109, 566 N.E.2d 1189 quoting Tiller v. Hinton (1985), 19 Ohio St.3d 66, 68, 19 OBR 63, 65, 482 N.E.2d 946, 949.
.Actual notice is "such notice as is positively proved to have been given to a party directly and personally, or such as he is presumed to have received personally because the evidence within his knowledge was sufficient to put him upon inquiry." Black's Law Dictionary, (6 Ed.Rev. 1990) 1061. "Constructive notice may be afforded by a recorded instrument by lis pendens, and by knowledge of circumstances sufficient to awaken suspicion and put the purchaser on inquiry." 41 Ohio Jurisprudence 3d § 78. We have previously held that a "good faith mortgagee is charged with constructive notice only of the rights of the person in possession and the rights of persons claiming an interest under a duly recorded instrument." Mellon Natl. Mortgage Co. of Ohio v. Jones (1977), 54 Ohio App. 2d 45, 374 N.E.2d 666, This " 'notice is gained either from public records of the county or actual knowledge thereof.' " Id. at 49 citing Standard Oil Co. v. Moon (1930), 34 Ohio App. 123, 8 Ohio Law Abs. 230, 170 N.E. 368, 31 Ohio L. Rep. 239.
.R.C. 5301.25, Ohio's recording statute, provides in relevant part: All deeds, land contracts referred to in division (A)(2)(b) of section 317.08 of the Revised Code, and instruments of writing properly executed for the conveyance or encumbrance of lands, tenements, or hereditaments, other than as provided in division (C) of this section and section 5301.23 of the Revised Code, shall be recorded in the office of the county recorder of the county in which the premises are situated. Until so recorded or filed for record, they are fraudulent insofar as they relate to a subsequent bona fide purchaser having, at the time of purchase, no knowledge of the existence of that former deed, land contract, or instrument.
.Applying the foregoing, appellant asserts that appellee had constructive notice of her life estate interest as a result of her possession of the property. In support, appellant references her affidavit, in which she asserts she has resided at the property since she took possession in 1995. Further, appellant argues "the world was required to take notice of [her] possession of the real property and in turn engage in a diligent search as to Appellant Roush's interest." (Appellant's Brief at 19.)
.Appellant further argues that appellee had constructive notice of her interest in the property as a result of the Roush lawsuit. She argues that appellee had a duty to apprise itself in detail as to the disposition of the Roush lawsuit. Without citing any supporting authority, appellant asserts "it is simply not reasonable diligence of a mortgagee or purchaser to simply witness that litigation against a potential borrower no longer remains pending." n4 (Appellant's Brief at 21.)
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- Appellee asserts that the trial court correctly relied upon Bank of N.Y v. Stambaugh, Trumbull App. No. 2002-T-0184, 2003 Ohio 6416 at P16, in which the Eleventh Appellate District found a party receiving a property interest was required to comply with the recording requirements of R.C. 5301.23 and 5301.25. We agree.
.In Spring Lakes Ltd. v. O.F.M. Co. (1984), 12 Ohio St.3d 333, 12 Ohio B. 431, 467 N.E.2d 537, the Supreme Court of Ohio held that "in order for a purchaser of real property to be charged with constructive notice of an encumbrance contained in a prior recorded instrument, the prior instrument must be recorded in the purchaser's chain of title." Id. at 336. Here, it is undisputed that appellant did not record her "reserved" life estate interest when the property was conveyed from Augustine to Roush, nor did she record a certificate of judgment after she won the Roush lawsuit, in accordance with the requirements of R.C. 5301.25. Thus, the trial court was correct in determining that appellee did not have constructive notice of appellant's interest in the property.
- In Ohio, knowledge of the payments made under a contract to purchase real estate has not been a prerequisite to notice of the vendee's rights under the contract, arising from such payments. The possession by the vendee of the lands subject to his contract has been held sufficient notice of the vendee's rights, whether or not the possession was actually known to a subsequent mortgagor. Jaeger v. Hardy, 48 Ohio St. 335, 27 N. E. 863; Ranney v. Hardy, 43 Ohio St. 157, 1 N. E. 523.
.
In the Jaeger case, the court declared, at page 340: "In this case, the possession of the defendant, Dixon * * * was sufficient notice of his rights under the contract * * *." In the Ranney case, the court said, at page 159, "as * * * [the mortgagee], when he loaned the money * * * knew that * * * [the vendee] was residing on the lot with his family, he was charged with knowledge of the terms and conditions upon which such possession was held."
.
Therefore, in the instant cases this court holds that notice to Wayne of an outstanding contract to purchase the subject premises was sufficient notice of the equities of the Lantzes under such contract.
- A party is on constructive notice of another’s interest in real property where the party "could have learned by inquiry of the person in possession and of others who, they had reason to believe, knew of facts which might affect title, and also by what appeared in the appropriate indexes in the office of the recorder of deeds." Lund v. Heinrich, 410 Pa. 341, 346, 189 A.2d 581, 584 (1963).
- Pennsylvania Bona Fide Purchaser, Possession, Duty To Inquire,
- Pennsylvania Bona Fide Purchaser, Possession, Duty To Inquire - Federal Cases.
- Status as a bona fide purchaser is an affirmative defense to a title dispute. See Cooksey v. Sinder, 682 S.W.2d 252, 253 (Tex. 1984) (per curiam). A bona fide purchaser is not subject to certain claims or defenses. See Carter v. Converse, 550 S.W.2d 322, 329 (Tex. Civ. App.--Tyler 1977, writ ref'd n.r.e.). To receive this special protection, one must acquire property in good faith, for value, and without notice of any third-party claim or interest. Houston Oil Co. v. Hayden, 104 Tex. 175, 135 S.W. 1149, 1152 (Tex. 1911); Carter, 550 S.W.2d at 329.
.Notice may be constructive or actual. Flack v. First Nat'l Bank, 148 Tex. 495, 226 S.W.2d 628, 631 (Tex. 1950); American Surety Co. v. Bache, 82 S.W.2d 181, 183 (Tex. Civ. App.--Fort Worth 1935, writ ref'd). Actual notice rests on personal information or knowledge. Flack, 226 S.W.2d at 631. Constructive notice is notice the law imputes to a person not having personal information or knowledge. Flack, 226 S.W.2d at 632.
.One purchasing land may be charged with constructive notice of an occupant's claims. This implied-notice doctrine applies if a court determines that the purchaser has a duty to ascertain the rights of a third-party possessor. See Collum v. Sanger Bros., 98 Tex. 162, 82 S.W. 459, 460 (Tex. 1904); American Surety Co., 82 S.W.2d at 183. When this duty arises, the purchaser is charged with notice of all the occupant's claims the purchaser might have reasonably discovered on proper inquiry. Dixon v. Cargill, 104 S.W.2d 101, 102 (Tex. Civ. App.--Eastland 1937, writ ref'd); see also Flack, 226 S.W.2d at 632.
.The duty arises, however, only if the possession is visible, open, exclusive, and unequivocal. See Strong v. Strong, 128 Tex. 470, 98 S.W.2d 346, 350 (Tex. 1936) (holding claimant residing as "a member of [the record title-owner's] family" was not open or exclusive); see also Shaver v. National Title & Abstract Co., 361 S.W.2d 867, 869 (Tex. 1962) (holding buried pipeline not "visible"); Paris Grocer Co. v. Burks, 101 Tex. 106, 105 S.W. 174, 176 (Tex. 1907) (holding severed portion of a tract of land, though fenced off, was "too uncertain and equivocal" to give purchaser notice); Boyd v. Orr, 170 S.W.2d 829, 834 (Tex. Civ. App.--Texarkana 1943, writ ref'd) (holding minor children's occupancy in mother's homestead was "not the character of possession as would constitute constructive notice"); De Guerin v. Jackson, 50 S.W.2d 443, 448 (Tex. Civ. App.--Texarkana 1932) (holding there was no "visible" circumstance pointing to claimant as possessor of field and noting that "all authorities agree" that the possession must be "open, visible, and unequivocal" to impute notice to a potential purchaser),aff'd, 124 Tex. 424, 77 S.W.2d 1041 (Tex. 1935).
.In Strong, we described the kind of possession sufficient to give constructive notice as "consisting of open, visible, and unequivocal acts of occupancy in their nature referable to exclusive dominion over the property, sufficient upon observation to put an intending purchaser on inquiry as to the rights of such possessor." Strong, 98 S.W.2d at 350. Possession that meets these requirements--visible, open, exclusive, and unequivocal possession--affords notice of title equivalent to the constructive notice deed registration affords. Strong, 98 S.W.2d at 348. However, we also held that "ambiguous or equivocal possession which may appear subservient or attributable to the possession of the holder of the legal title is not sufficiently indicative of ownership to impute notice as a matter of law of the unrecorded rights of such possessor." Strong, 98 S.W.2d at 350.
- A purchaser of land is charged with constructive notice of all claims of a party in possession of the property that the purchaser might have discovered had he made proper inquiry. Apex Fin. Corp. v. Garza, 155 S.W.3d 230, 234 (Tex. App.--Dallas 2004, pet. denied); see also Madison, 39 S.W.3d at 606. More specifically, possession by a third party requires that the purchaser make such inquiries as a reasonable person would, and the failure to make such inquiries charges the purchaser with knowledge of the claims and facts such inquiry would have revealed. See Collum v. Sanger Bros., 98 Tex. 162, 82 S.W. 459, 460 (1904); Aldridge v. N.E. I.S.D., 428 S.W.2d 447, 449 (Tex. Civ. App.--San Antonio 1968, writ ref'd n.r.e.); Astin v. Martin, 289 S.W. 442, 444 (Tex. Civ. App.--Austin), rev'd on other grounds, 295 S.W. 584 (1926).
- The Texas Property Code provides for the recording of real property transfers and limits the validity of unrecorded instruments as follows:
.(a) A conveyance of real property . . . is void as to a creditor or to a subsequent purchaser for a valuable consideration without notice unless the instrument has been acknowledged, sworn to, or proved and filed for the record as required by law.
.(b) The unrecorded instrument is binding . . . on a subsequent purchaser who does not pay a valuable consideration or who has notice of the instrument. TEX. PROP. CODE ANN. § 13.001 (Vernon 2006). Thus, an unrecorded conveyance is binding on those who have knowledge of the conveyance. Burris v. McDougald, 832 S.W.2d 707, 709 (Tex. App.-Corpus Christi 1992, no writ). A person who acquires property in good faith, for value, and without notice of any third-party claim or interest is a bona fide purchaser. Status as a bona fide purchaser is an affirmative defense to a title dispute. Madison v. Gordon, 39 S.W.3d 604, 606, 44 Tex. Sup. Ct. J. 410 (Tex.2001).
.Notice will defeat the protection otherwise afforded a bona fide purchaser. City of Richland Hills v. Bertelsen, 724 S.W.2d 428, 429 (Tex.App.-Fort Worth 1987, no writ). "Notice" is broadly defined as information concerning a fact actually communicated to a person, derived by him from a proper source, or presumed by law to have been acquired. Flack v. First Nat'l Bank, 148 Tex. 495, 226 S.W.2d 628, 631 (Tex.1950). Notice may be actual or constructive. Id. Actual notice results from personal information or knowledge, as well as those facts which reasonable inquiry would have disclosed. Constructive notice is notice the law imputes to a person not having personal information or knowledge. Madison, 39 S.W.3d at 606; Flack, 226 S.W.2d at 631-632.
.A purchaser of land is charged with constructive notice of all claims of a party in possession of the property that the purchaser might have discovered had he made proper inquiry. Apex Fin. Corp. v. Garza, 155 S.W.3d 230, 234 (Tex.App.-Dallas 2004, pet. denied). This duty to ascertain the rights of a party in possession of the property arises when the possession is open, visible, exclusive, and unequivocal. Id. see also, Madison, 39 S.W.3d at 606.
Virginia: Brooks v. Lum, Case No. (Chancery) 00-13, 52 Va. Cir. 390; 2000 Va. Cir. LEXIS 301; Circuit Court of the City Of Winchester, Virginia (2000):
- When the purchaser has actual knowledge that there are persons in possession of the property being purchased who dispute the seller's title, he has a duty to inquire about the circumstances of that possession. Ely v. Johnson, 114 Va. 31, 75 S.E. 748 (1912) (purchaser on notice as to possession and use of land by another).
.As stated in 58 Am. Jur. 2d, Notice, § 21: Possession of land is notice to the world of every legal or equitable right that the possessor has therein. It is a fact putting all persons on inquiry as to the nature of the occupant's claims, as well as the claims under whom he occupies.
."Under the [recording] statute, only purchasers without notice can take advantage of a failure to record." National Mutual Building & Loan Association v. Blair, 98 Va. 490, 498, 36 S.E. 513. "Such a failure cannot affect a purchaser who has actual notice." Chavis v. Gibbs, 198 Va. 379, 383, 94 S.E.2d 195 (1956). In Chavis v. Gibbs, 198 Va. 379, 385, 94 S.E.2d 195 (1956), the Supreme Court stated "whatever fairly puts a person on inquiry is sufficient notice where the means of knowledge are at hand; and if he omits to inquire, he is then chargeable with all the facts which, by a proper inquiry, he might have ascertained."
- Notice here is governed by WIS. STAT. § 706.09(2): A purchaser has notice of a prior outstanding claim or interest, within the meaning of this section wherever, at the time such purchaser's interest arises in law or equity:….(a) … Such purchaser has affirmative notice apart from the record of the existence of such prior outstanding claim, including notice, actual or constructive, arising from use or occupancy of the real estate by any person at the time such purchaser's interest therein arises, whether or not such use or occupancy is exclusive; but no constructive notice shall be deemed to arise from use or occupancy unless due and diligent inquiry of persons using or occupying such real estate would, under the circumstances, reasonably have disclosed such prior outstanding interest; nor unless such use or occupancy is actual, visible, open and notorious….
.Under this statute, actual or constructive notice of a claim can arise from use (1) "by any person" (2) "at the time … the purchaser's … interest arises," (3) "whether or not [the] use … is exclusive…." WIS. STAT. § 706.09(2). In addition, constructive notice of a claim can exist only if: (1) diligent inquiry of persons using the land would have revealed the claimed interest, and (2) the use is "actual, visible, open and notorious…." Id.
- The applicable statute is Wis. Stat. § 706.09, which provides in part:
.(1) [...], (2) Notice of prior claim. A purchaser has notice of a prior outstanding claim or interest, within the meaning of this section wherever, at the time such purchaser's interest arises in law or equity:
.(a) Affirmative notice. Such purchaser has affirmative notice apart from the record of the existence of such prior outstanding claim, including notice, actual or constructive, arising from use or occupancy of the real estate by any person at the time such purchaser's interest therein arises, whether or not such use or occupancy is exclusive; but no constructive notice shall be deemed to arise from use or occupancy unless due and diligent inquiry of persons using or occupying such real estate would, under the circumstances, reasonably have disclosed such prior outstanding interest; nor unless such use or occupancy is actual, visible, open and notorious.
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(1) See:- 1-28-09: Lack Of Knowledge Or Partcipation In Fraud Not Enough To Sustain Bona Fide Purchaser Status In Equity Stripping, Foreclosure Rescue Deal;
- 1-26-09: Faulty Service Of Process In Tax Foreclosure, Failure To Investigate Rights Of Persons In Possession Leaves Unwitting Buyer Empty Handed.
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